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Tomorrow’s apparel industry: products, markets, and processes – forecasts to 2016

2010 edition

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© 2010 All content copyright Aroq Ltd. All rights reserved.

Tomorrow’s apparel industry:

products, markets, and processes –

forecasts to 2016

2010 edition

May 2010

By Malcolm Newbery

Published by

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Page iv Table of contents


Table of contents

Single-user licence edition .......................................................................................................... ii

Copyright statement ............................................................................................................... ii Incredible ROI for your budget – single and multi-user licences ............................................. ii just-style.com membership .................................................................................................... iii

Table of contents ........................................................................................................................ iv

List of figures ............................................................................................................................. vii

List of tables ............................................................................................................................. viii

Chapter 1 Introduction and hypothesis ...................................................................................... 1

Demassification ..................................................................................................................... 1 Fully automated clothing production ....................................................................................... 2

The second Toyota system .................................................................................................... 3 Hypothesis ............................................................................................................................. 4

Chapter 2 Forecast methodology ............................................................................................... 5

Caution .................................................................................................................................. 5

Definition of apparel ............................................................................................................... 5 Methodology for market forecasts .......................................................................................... 5

Methodology for the other forecasts ....................................................................................... 6

Chapter 3 The market before and during the current downturn ............................................... 8

The market in the recent past ................................................................................................. 9

The market in the current downturn ........................................................................................ 9 The market: likely future scenarios ....................................................................................... 10

Chapter 4 Recent merchandise trends and product changes ................................................ 12

The product mix in the recent past ....................................................................................... 13 The product mix in the current downturn .............................................................................. 13

The product mix: likely future scenarios ............................................................................... 14

Chapter 5 Marketing and distribution evolution, before and during the current downturn .. 15

Distribution in the recent past ............................................................................................... 16 Distribution in the current downturn ...................................................................................... 16 Distribution: likely future scenarios ....................................................................................... 17

Chapter 6 The supply chain in the apparel industry ................................................................ 19

Consumers .......................................................................................................................... 20

Retailers .............................................................................................................................. 20 Brands and wholesalers ....................................................................................................... 20 Branded and external manufacturers ................................................................................... 21

Fabric and other material suppliers ...................................................................................... 21 Value added in the supply chain .......................................................................................... 21

Page v Table of contents


Chapter 7 The industry before and during the current downturn ........................................... 22

Wholesale values ................................................................................................................. 22 The industry in the recent past ............................................................................................. 23

The industry in the current downturn .................................................................................... 24 The industry: likely future scenarios ..................................................................................... 24

Chapter 8 Sourcing and production before and during the current downturn ...................... 26

Sourcing and production in the recent past .......................................................................... 27 Sourcing and production in the current downturn ................................................................. 27

The industry: likely future scenarios ..................................................................................... 29

Chapter 9 Tomorrow’s apparel industry: the arguments ........................................................ 31

The status of the apparel industry worldwide in numbers ..................................................... 31

Chapter 10 Political and government influences ..................................................................... 32

The multi-fibre agreement .................................................................................................... 32 Other government interventions ........................................................................................... 33

DR-CAFTA .................................................................................................................. 33

US textile industry versus China .................................................................................. 34 EU directive on clothing recycling ................................................................................ 34

Australian federal funding for TCF ............................................................................... 34

Chapter 11 Ethics, Fairtrade and corporate social responsibility .......................................... 36

The case for and against ...................................................................................................... 36

Low wages in Sri Lanka ....................................................................................................... 36

Dumping chemical waste in Africa ........................................................................................ 37 Educating the consumer in environmental issues ........................................................ 38

Primark goes ethical ............................................................................................................ 38

Conclusion on its impact ...................................................................................................... 39

Chapter 12 Technology and systems ....................................................................................... 40 Information exchange (EDI) ................................................................................................. 40 Factory layout ...................................................................................................................... 40

The progressive bundle unit ......................................................................................... 40 Team working .............................................................................................................. 41

CAD/CAM technology .......................................................................................................... 41

Product lifecycle management (PLM) ................................................................................... 42 Supply chain management ................................................................................................... 43

Chapter 13 Blue skies thinking: likely and unlikely future scenarios for the apparel industry

.................................................................................................................................................... 45

Personalisation .................................................................................................................... 45 Rejection of the throw-away society ..................................................................................... 45 Smart clothes ....................................................................................................................... 46 Electronics and textiles ........................................................................................................ 46 Individual deliveries and the decline of shops....................................................................... 47

Local manufacturing ............................................................................................................. 48 Changes caused by government legislation ......................................................................... 48

Totally new fibres and fabrics ............................................................................................... 49

Page vi Table of contents


Blue-sky conclusion ............................................................................................................. 50

Page vii List of figures


List of figures

Figure 1: The supply chain in the apparel industry from producer to consumer ............................ 19

Page viii List of tables


List of tables

Table 1: Retail value of the global apparel market by region, 2007-2016 (US$bn) ......................... 8

Table 2: Retail value of the global apparel market by clothing type, 2007-2016 (US$bn) ............. 12

Table 3: Retail value of the global apparel market by distribution channel, 2007-2016 (US$bn) ... 15

Table 4: Wholesale value of the global apparel market by region, 2007-2016 (US$bn) ................ 22

Table 5: Production value of the global apparel market by region, 2007-2016 (US$bn) ................ 26

Table 6: Global apparel production and distribution by region where made, 2010 (US$bn, % share)

.............................................................................................................................. 28

Note: data may not sum in some tables due to rounding

Chapter 1 Introduction and hypothesis


Chapter 1 Introduction and

hypothesis

This just-style report is a think-piece. It is a think-piece about the future of the

apparel industry. It is intended to encourage apparel industry executives to

consider what is going to shape future products, markets and processes in the

apparel industry.

In order to do this, forecasts have to be made about future trends in what is, by

definition, a very fast and continuously changing industry, one which feeds and

lives on change. As Yogi Berra, the famous US baseball player, coach and

perpetrator of some of the worst opposites of bon mots put it: “I hate making

predictions, especially about the future”.

Another of his wonderful non-aphorisms was “it feels like déjà vu, all over

again”. But the theme of this review is that there is a lot of déjà vu, all over

again, in what is happening in the apparel industry. The industry is

reconsidering trends which were predicted as long as 30 years ago, did not

happen then, have not happened since, and yet are still talked up as if they are

about to happen now.

Demassification

The first of the great déjà vu moments concerns the acclaimed philosopher,

economist and futureologist Alvin Toffler. His big idea in the 1970s was

demassification. He predicted that mass production would diminish in

importance in a post industrial society, as consumers became able to

personalise what they wanted and industries became able of creating products

in quantities of one to satisfy the individual’s demands.

In his book The Third Wave, Toffler describes three types of societies, based

on the concept of ‘waves’ – each wave pushing the older societies and

cultures aside:

○ The ‘First Wave’ is society after the agrarian revolution, which replaced

the first hunter-gatherer cultures.

Chapter 2 Forecast methodology


Chapter 2 Forecast methodology

Caution

“Images in the rear view mirror may appear larger than they are.” It’s a famous

saying and very pertinent to this apparel subject.

Chapters 3 through to Chapter 8 contain quantification and trend forecasts for

the apparel industry up to 2016. This is a wide-ranging and sweeping

calculation, and is intended more to provide direction than absolute numbers.

As has been mentioned in many previous just-style reports, the veracity of

many apparel industry numbers is questionable. In particular, trade figures of

exports by and imports from developing countries are full of errors created by

“lies, damned lies and statistics”.

Definition of apparel

In this report, apparel means wearing apparel i.e. clothes. It does not include

shoes, hats or any accessories like bags, belts or costume jewellery.

Methodology for market forecasts

In Chapter 3, the size of and trends in apparel markets are predicted. The

major world markets are, as in standard practice in just-style reports:

○ North America;

○ Western Europe;

○ Eastern Europe and Turkey;

○ Japan and Korea (South);

○ the rest of the world.

All value figures are in billions of US dollars. Values are at retail prices

including sales taxes, which is to say that they are:

○ the price on the ticket;

○ what the final consumer actually pays at the cash till.

Values are given for:

○ Was – the recent past (2007), just before the world financial upheavals

of the 2008 credit crunch.

Chapter 3 The market before and during the current downturn


Chapter 3 The market before and

during the current downturn

All the trend figures explained and discussed in this Chapter are given below

as Table 1.

Table 1: Retail value of the global apparel market by region, 2007-2016 (US$bn)

Markets values at retail prices (US$bn)

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey

Japan and South Korea

Rest of the world World total

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative

Growth in US$ value %, 2016/2010

positive

neutral

negative

Markets % share at retail prices

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey


Rest of the world

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative

Growth in % share, 2016/2010

positive

neutral

negative

Source: just-style

Chapter 4 Recent merchandise trends and product changes


Chapter 4 Recent merchandise

trends and product changes

All the trend figures explained and discussed in this chapter are given below

as Table 2.

Table 2: Retail value of the global apparel market by clothing type, 2007-2016 (US$bn)

Product values at retail prices (US$bn)

Date of estimates

Women's outerwear

Women's underwear Men's Children's Sportswear

All product totals

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Product % share at retail prices

Date of estimates

Women's outerwear

Women's underwear Men's Children's Sportswear

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Source: just-style

Chapter 5 Marketing and distribution evolution, before and during the current downturn


Chapter 5 Marketing and distribution

evolution, before and during the

current downturn


as Table 3.

Table 3: Retail value of the global apparel market by distribution channel, 2007-2016

(US$bn)

Distribution values at retail prices (US$bn)

Date of estimates

Traditional retail

shops Markets Catalogue mail order

Catalogue on the

internet

Social networking

and other channels

Total distribution

on channels

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Distribution % share at retail prices

Date of estimates

Traditional retail

shops Markets Catalogue mail order

Catalogue on the

internet

Social networking

and other channels

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Source: just-style

Chapter 6 The supply chain in the apparel industry


Chapter 6 The supply chain in the

apparel industry

In Chapter 7, apparel market values at retail prices are converted to apparel

industry selling values at wholesale prices. In order to understand the logic of

this, it is helpful to remind the reader of the nature of the apparel industry

supply chain. The chain is shown schematically in Figure 1.

Figure 1: The supply chain in the apparel industry from producer to consumer

Source: just-style

Chapter 7 The industry before and during the current downturn


Chapter 7 The industry before and

during the current downturn

Wholesale values


as Table 4. In Table 4, the industry is valued at wholesale prices, the prices at

which merchandise is sold into the retailer.

Table 4: Wholesale value of the global apparel market by region, 2007-2016 (US$bn)

Industry values at wholesale prices (US$bn)

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey



Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Industry % share at wholesale prices

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey


Rest of the world

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Source: just-style

Chapter 8 Sourcing and production before and during the current downturn


Chapter 8 Sourcing and production

before and during the current

downturn


as Table 5. In Table 5, the industry is valued at its production prices, the prices

at which merchandise is sold to the wholesaler.

Table 5: Production value of the global apparel market by region, 2007-2016 (US$bn)

Production values at producer’s prices (US$bn)

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey



Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Production % share at wholesale prices

Date of estimates

North America

Western Europe

Eastern Europe

and Turkey


Rest of the world

Was 2007

Is 2010

Will be 2016

Will be if

positive

neutral

negative


positive

neutral

negative

Source: just-style

Chapter 9 Tomorrow’s apparel industry: the arguments


Chapter 9 Tomorrow’s apparel

industry: the arguments

The hypothesis reconsidered in the context of the forecasts

There were three developments, according to the futureologists, that were

supposed to change the apparel industry:

○ the theory of demassification in a post industrial society;

○ the ability to automate garment production;

○ the shift from large factory production to small demand pull units.

When conjoined with the pressure of fast fashion retailing requiring short lead

times and constant style change and technological advances in the product

development part of the supply chain, then an apparel industry was predicted

that supplied small quantities (possibly even individual made-to-measure

garments) from local sources very quickly. This is clearly not the case.

The status of the apparel industry worldwide in numbers

The numbers, both now and those forecast for 2016, paint a picture of an

apparel industry in which:

○ North America and Western Europe constitute just over half of the

market by US dollar value now and will still constitute just over half of

the market by US dollar value in 2016;

○ there will be no dramatic changes to the nature of our apparel

garments and therefore no dramatic changes to the manner of their

production;

○ distribution channels are, however, changing. This will have an impact

but, perversely, in an opposite manner to the demassification

hypothesis;

○ the location of the wholesale industry shifts away from North America

and Europe towards Asia. This also works against the hypothesis;

○ production definitely will move further in the direction of Asia, although

the pace of change may decelerate as the law of diminishing returns

applies to low-cost garment production.

Chapter 10 Political and government influences


Chapter 10 Political and government

influences

The multi-fibre agreement

The most wide-ranging, and the most well-known, government intervention in

the workings of apparel industry markets was the Multi Fibre Agreement

(MFA). It governed trade from 1974 through to 2004, by imposing quotas on

the amount developing countries could export to developed countries. It

expired on 1 January 2005.

The MFA was introduced in 1974 as a short-term measure intended to allow

developed countries to adjust to imports from the developing world.

Developing countries have a natural advantage in textile production because it

is labour intensive and they have low labour costs. It was therefore a form of

protectionism for the industries of the developed world. However, the

arrangement was not negative for all developing countries. For example the

European Union (EU) imposed no restrictions or duties on imports from the

very poorest countries, such as Bangladesh, leading to a massive expansion

of the industry there.

The Agreement on Textiles and Clothing provided for the gradual dismantling

of the quotas that existed under the MFA. This process was completed on 1

January 2005. However, large tariffs remain in place on many textile products.

Bangladesh was expected to suffer the most from the ending of the MFA, as it

was expected to face more competition, particularly from China. However, this

was not the case. It turns out that even in the face of other economic giants

such as China, Bangladesh’s labour is cheaper than anywhere else in the

world.

During early 2005, textile and clothing exports from China to the West grew by

xxx% or m ore in m any items, as retail buyers rushed to purchase from the

newly unshackled production source. This led the US and EU to cite China’s

WTO accession agreement, which allowed them to restrict the rate of growth

to xxx% per year until 20 08. In June 2005, China agreed with the EU to lim it

the rate to xx% for three years. No such agreem ent was reached with the US,

which im posed its own im port growth quotas of xxx% instead.

Chapter 11 Ethics, Fairtrade and corporate social responsibility


Chapter 11 Ethics, Fairtrade and

corporate social responsibility

The case for and against

The purpose of this chapter is to look at the actual effects of these three

business practices on the current and future structure of the apparel industry.

The arguments are by now well-known.

The case ‘for’ is that being ethical and trading fairly is what the consumer

wants, so it therefore conditions what the consumer buys. As a result, it is in

the interests of retailers to behave responsibly, and this trickles back into the

corporate practices of the apparel industry.

The counter argument is that retailers cannot afford to be uncompetitive on

price against their direct rivals on the High Street, because the consumer is

driven by price, especially in recessionary times. That leads to sourcing where

labour is cheap, and potentially underage. A spokesman for the Pakistan

government was brave enough in 2008 to admit that he was aware of low pay

and underage working from home, but that without it there would be no jobs,

and hence no pay for the family at all.

Low wages in Sri Lanka

The most recent article to cover this subject read by just-style was in the UK

Sunday Times newspaper of 31 January 2010 about pay and conditions in

apparel factories in Sri Lanka. It started by reviewing the code of conduct of

the Ethical Trading Initiative (ETI), a body which has many prominent UK

retailers amongst its members. The code of conduct includes for apparel

production workers:

○ the provision of a ‘living wage’;

○ a maximum 48 hour week on a regular basis.

The ETI itself admits, according to its spokesman, Stephen Rylance, that:

“There is a gulf between the code and actual pay. The deplorable reality is that

low wages remain a fact of life for many garment workers.” Even Marks &

Spencer, whist strenuously defending its record as “one of the UK’s leading

Chapter 12 Technology and systems


Chapter 12 Technology and systems

Information exchange (EDI)

If neither government interventions nor corporate social responsibility are to be

the drivers of change in the apparel industry, a third contender is technology,

and specifically computer systems. But a search through the articles on the

just-style website produced some surprising results. In response to a specific

search on ‘apparel industry technology progress’, 62 results emerged.

However a closer examination of the ‘hits’ revealed that:

○ only three of them were dated 2009;

○ only five were later than 2006;

○ all the rest were old.

This prompts the question; where are the new manufacturing technologies and

the new computer systems?

In the remainder of this chapter, a number of them will be explored. It is true

that they have had some impact on the nature of the apparel industry. But the

one that has enabled the industry to conduct itself in a fast fashion retail

environment, but from low cost countries around the world is electronic data

interchange (EDI).

EDI is not new. The Marks & Spencer use of the Tradanet system to

communicate with its suppliers dates from the middle of the 1980s. It also pre-

dates sending information through the internet. But the idea that information, in

a standard and safe form can be sent instantaneously anywhere in the world,

is the one major reason why low-cost country suppliers can flourish in a fast

fashion retail environment.

Factory layout

The progressive bundle unit

In spite of the movement away from commodity products to fast fashion, it is a

fact that the la yout of factories around the world is over xx% lik ely to be the

progressive bundle unit (PBU) system. In this production system, work flows

though conventional lines of m achinists with about xx people per line,

Chapter 13 Blue skies thinking: likely and unlikely future scenarios for the apparel industry


Chapter 13 Blue skies thinking:

likely and unlikely future scenarios

for the apparel industry

A personal viewpoint

Blue skies thinking is personal, and sometimes out of the box. So, it is

expressed here as the author’s personal views. They are not necessarily

endorsed by just-style.

Personalisation

If Toffler’s ideas about the third phase of industrialisation had been correct, we

would have seen the demassification of the clothing market into a series of

personalised and individualised consumer orders. But we have not, yet, except

in a few niche areas. The niche areas are:

○ The creation of personalised apparel from a set of standard

components. The best example of this today are the personalised

trainers available from Nike, created by mixing components. It is a bit

like assembling a kitchen for your house from standard parts at Ikea.

○ The return not only to made-to-measure individual garments, but of

made-to-measure created from computerised body contour imaging to

obtain the exact measurements of the human form. Why consumers

want to do this when they cannot guarantee that their measurements

will stay the same over time is a mystery to the author.

As a result of the two examples cited, the author feels that personalisation is a

dead-end. The first is not true personalisation. It is a marketing gimmick. The

second can only appeal to affluent people who are prepared to spend money

on apparel where the clothes may outlast the body. It will be beneficial for the

alterations business, but not for much else.

Rejection of the throw-away society

If the question had been asked about sustainability in 2007, the author

believes that the likely reply would have been that it was an environmental and

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